Lanco Infra shares surge 36 per cent in 3 days; brokerage sees 41 per cent upside potential

Shares of Lanco Infratech advanced a whopping 36 per cent in last three sessions after the company said it was looking to raise up to $1 billion in next 18 months via stake sale and listing power business.

The stock hit upper circuit for the second straight session on Thursday and rose as much as 7.02, up 9.86 per cent on the Bombay Stock Exchange (BSE).

The scrip had closed at Rs 6.39, up 19.89 per cent on Tuesday, while it ended at Rs 5.33, up 6.81 per cent on Monday.

Broking firm Edelweiss Securities maintained 'buy' on the stock and said the company is in the recovery mode. The brokerage expects the stock to see an upside of 40.84 per cent against the previous closing price.

"Resolution of regulatory issues seems to be behind us and progress on asset/stake sale, leading to reduction in debt will determine stock performance. We maintain 'BUY/SP' with some of the parts-based (SoTP-based) target price of Rs 9," said Edelweiss Securities in a research note.

Following are the key risks that brokerage believes one should keep an eye on:

• Timely completion of under construction power projects
• Fuel supplies for under construction power projects
• Regulatory approvals of pending tariff orders
• Sale of assets for deleveraging the balance sheet

Lanco, which has been losing money in recent years amid a high debt load and delays in finishing its power projects, posted a consolidated net profit of Rs 98.98 crore in the second quarter of the current fiscal year, due to tax reimbursements and favourable power tariff order.

The firm posted a loss of Rs 527.48 crore in the same period last year, Lanco Infratech Ltd (LITL) said in BSE filing.

According to the statement, the company earned profits on the consolidated basis after a gap of three years.